A case study in chapter 6 discusses the federal minimum-wage law. Suppose the minimum wage is...
A case study in chapter 6 discusses the federal minimum-wage law.
- Suppose the minimum wage is above the equilibrium wage in the market for unskilled labor. Using a supply-and-demand diagram of the market for unskilled labor, show the market wage, the number of workers who are employed, and the number of workers who are unemployed. Also show the total wage payments to unskilled workers.
- Now suppose the secretary of labor proposes a decrease in the minimum wage (with the lower minimum wage still above the equilibrium wage for unskilled labor). What effect would this decrease have on employment? Does the change in employment depend on the elasticity of demand, the elasticity of supply, both elasticities, or neither?
- What effect would this decrease in the minimum wage have on unemployment? Does the change in unemployment depend on the elasticity of demand, the elasticity of supply, both elasticities, or neither?
- If the demand for unskilled labor were inelastic would the proposed decrease in the minimum wage raise or lower the total wage payments to unskilled workers? Would your answer change if the demand for unskilled labor were elastic?
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A case study in chapter 6 discusses the federal
minimum-wage law.
Suppose the minimum wage is...
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Recently, the Federal Minimum Wage is set at $7.25 per hour. 1. Suppose the market for...
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